I believe I'm under the Gun Free, with our topic this week being Fin Tech. As I may have indicated, unfortunately, however frustrating, I didn't get to finish my work, perhaps an ambitious task to do properly, so credit due again to @UmiTrader... So here goes. Apologies if a long post or not in the format we may be used to...
Fintech
Before I start, I must preface that this work pales in comparison to the excellent summaries @UmiTrader gave us last week, so forgive me if the figures are out (in most cases I looked at the Financial Reports for FY16 and the September quarterlies.
Obviously before I started compiling this list, I ran into a lot of companies that may not be a FinTech in the purest sense, i.e. relating to the financial services sector. But I came across some good definitions here from Investopedia. http://www.investopedia.com/terms/f/fintech.asp#ixzz4W5NqGXZN What is 'Fintech'
Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century. Originally, the term applied to technology applied to the back-end of established consumer and trade financial institutions. Since the end of the first decade of the 21st century, the term has expanded to include any technological innovation in the financial sector, including innovations in financial literacy and education, retail banking, investment and even crypto-currencies like bitcoin. BREAKING DOWN 'Fintech'
The term financial technology can apply to any innovation in how people transact business, from the invention of money to double-entry bookkeeping. Since the internet revolution and the mobile internet revolution, however, financial technology has grown explosively, and fintech, which originally referred to computer technology applied to the back office of banks or trading firms, now describes a broad variety of technological interventions into personal and commercial finance.
The List
1. AFY: Afterpay Holdings
IPO at a $1 in April 2016 - provides a buy now, pay later offer to retailers. Afterpay funds the customer’s transaction and recoups the money in four, fortnightly instalments. It receives a fee from the merchant for its services, as the opportunity to pay later encourages customers to increase their cart sizes.
Leveraged to online sales growth and the interface is sleek, sophisticated, and clearly appeals to younger generations. However, given they assume all end-customer non-payment risk and only generated FY16 Sales of 1.4m, with a market cap of just under $500m, there would appear to be significant a lot of growth already factored into the share price.
2. BPF: Bulletproof Group Limited
Bulletproof is a leading cloud services provider in Australia/ New Zealand. Their website specialty is assisting companies in all aspects of cloud services, including cloud strategy, planning, design, architecture, build, test, deployment, security, operations, support, and optimisation.
The company has been making and growing revenue for the last 3 years and finally managed to make a profit, albeit small in FY16. Like a lot of cloud companies, it appears that margins are wafer thin and revenue isn’t translating into higher profitability, unless significant scale is reached. Management have forecasted revenue growth of 14% up on FY16, and an underlying EBITDA of $6m, exclusive of liabilities re-valuation. Catalyst for share price appreciation would appear to come in profitability growth and a maiden dividend.
3. BPS Technology
BPS is made up of three divisions: Bartercard, TESS – Trade Exchange Software Services and the bucqi Platform. BPS is positioned to be the global software provider to Trade Exchanges as well as a leading global payments and loyalty business.
I have never been able to quite understand the value of the Bartercard business model and it’s supposed 24,000 SME’s that currently use it, however, the company delivered FY16 revenues of $50.2 million (a 4% increase) and a NPAT of $7.34m, ($0.5m lower than FY15) and declared full year dividends of 4cps. The most interesting event recently was the acquisition of the Entertainment book. I always thought as a younger whippersnapper that working as a cashier for various businesses, that those coupons were a pain in the backside, but the acquisition price seems to stack up on a FY17EV/EBITDA of 5.3x and on a FY17 P/E of 8x. However, I wonder, if despite the digital facelift that it’s business is in decline, and this acquisition was made for access to the merchants to leverage the Bartercard and bucqi (rewards app) platform. Entertainment also claims to have comprehensive suite of solutions for merchants and consumers, however, ‘Now Book It’ would be in an area of stiff competition given the likes of food service apps and booking platforms for bookings like Dimmi.
For me this an interesting watch this space play, as they also have deals with Alibaba partner SmartTrans (SMA), to open up Chinese merchants, and to see how the growth in Bartercard progresses in the US. Puzzlingly, despite the FY17 trading update, which includes significant cash revenues from the Entertainment acquisition, and the large equity raising, the company also issued a CN in December last year.
Finally though, take what I say with an element of bias, as I hold the direct competitor in the merchant space in Rewardle (RXH), and certainly the performance of BPS has been much better than RXH in the last 12 months. But as in investor looking for value, I know which one I would choose.
4. Cr8Tek
I don’t think anyone needs any introductions to this one. A star performer of late 2016 and likely to be a strong candidate in 2017. Cretek invests in pioneering technology solutions, with a particular focus on software marketing solutions, application software, communication software, SaaS, online social networking services, security and encryption. It’s flagship product, Flamingo, is an Enterprise SaaS company, which provides a Cognitive Virtual Assistant (AI) platform designed for selling complex financial products online. Flamingo’s AI or chatbot is called Rosie. @TraderGT has written outstanding write ups found here:
5. Digital X
DigitalX is a Blockchain-based software group disrupting the payments industry. DigitalX’s flagship product, AirPocket is an application that allows consumers to make quick, secure and cost effective money transfers worldwide.
Digital X has unfortunately been a sorry performer over the last 12 months, mainly due to management changes, and legacy issues, that look like they will drag the current SP down for the time being. The company announced a $1.62m CR last November with the Merchant group completing the placement, along with the new MD Leigh Travers, and the US based President Neel Krishnan contributing $350,000. The original co-founders Alex Karis and William Brindise stepped down from the board and Merchant cut management fees by more than 80%, saving almost $1m. Alex Karis had originally said he would agree to an escrow of his shares and accept a consultancy role, but a disagreement must have occurred and it would appear his shares are a drag on the market price.
At some point I feel this will be a good buy with an EV of around $5M, and lots of news flow The Company is focused on securing and developing key strategic partnerships between AirPocket and top tier Telco’s, banks and remittance companies (see their recent deals and partnerships from last year). In 2017, if Digital X can leverage these partnerships, their complimentary technologies and infrastructures, to expand AirPocket’s capabilities from mobile credit top ups to international bill payments and money transfers then there is lots of potential. Plus Merchant’s reputation isn’t bad so that helps too...
And sadly that's all folks.....
Perhaps if it's of any use to the STT crew I can finish it and maybe post the rest after the weekend's over, if that doesn't wreck @Freehold and his rules. Have a great weekend all
